EIS Texas Insurance Glossary

Actual Cash Value (ACV)
The value of insured property equal to its replacement cost minus depreciation.

Additional Insured
A person or organization other than the named insured who is covered under the policy through an endorsement.

Admitted / Non-Admitted Insurer
An admitted insurer is licensed and regulated by the state. A non-admitted (or surplus lines) insurer is not licensed in the state but may provide coverage when admitted markets are unavailable.

Agent / Agency
An individual or entity authorized to represent an insurance company, solicit coverage, and sometimes bind policies.

Aggregate Limit
The maximum amount an insurer will pay for all covered losses during a policy period.

Aggregate Stop Loss
A form of stop-loss protection in group captives or self-funded programs that limits total annual claim exposure for all participants.

All-Risk / Open Perils Coverage
Coverage that applies to all causes of loss except those specifically excluded in the policy.

Amendment / Rider / Endorsement
A document that modifies, adds, or removes coverage, conditions, or exclusions in the base policy.

Anti-Selection (Adverse Selection)
The tendency for higher-risk individuals or entities to seek more insurance protection, potentially skewing the risk pool.

Appraisal
An independent evaluation to determine the value of property or the amount of loss in a claim.

Assumed Risk
The portion of risk retained by an insurer, captive, or self-insured entity rather than being transferred to another carrier.

Assigned Risk Plan
A state-sponsored mechanism that assigns high-risk insureds to carriers when standard coverage is unavailable.

Binder
A temporary insurance contract that provides coverage until the formal policy is issued.

Blanket Coverage
Insurance that applies collectively to multiple locations, properties, or types of property under one limit.

Bonds - a form of debt security whereby the debt holder has a creditor stake in the company. Obligations issued by business units, governmental units and certain nonprofit units having a fixed schedule for one or more future payments of money; includes commercial paper, negotiable certificates of deposit, repurchase agreements and equipment trust certificates.

Broad Form
A type of policy providing coverage for more perils than the basic form, often adding additional causes of loss like falling objects or water damage.

Broker - an individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.

Builder’s Risk Insurance
Coverage that protects property under construction, including materials and equipment.

Business Income (Interruption) Coverage
Provides compensation for lost income and ongoing expenses when operations are interrupted by a covered peril.

Business Personal Property (BPP)
Movable property owned by a business, such as furniture, inventory, and equipment.

Captive Insurance
A risk-financing arrangement in which a company or group of companies forms its own insurance entity to insure its risks.

Cause of Loss / Peril
A specific event or hazard (such as fire, theft, or windstorm) that may cause a covered loss.

Certificate of Insurance (COI)
A document issued as proof of insurance coverage, summarizing key policy information.

Claim
A request made by an insured for payment of benefits under the policy.

Claim Adjustment Expense (LAE)
The costs an insurer incurs in investigating, defending, or settling claims.

Claims-Made Policy
A liability policy that provides coverage for claims made and reported during the policy period.

Coinsurance (Property)
A clause requiring the insured to carry coverage equal to a specified percentage of the property’s value. Failure to do so can reduce claim payments.

Collision Coverage
Auto coverage that pays for damage to your vehicle caused by collision or rollover.

Comprehensive Coverage
Auto coverage for non-collision losses, such as theft, fire, or vandalism.

Contingent Business Interruption
Coverage for income loss resulting from damage to suppliers, customers, or dependent properties.

Contractual Liability
Liability assumed under a contract, typically covered by endorsement.

Coverage Form / Coverage Part
Specific sections of a commercial policy that define the terms, conditions, and coverage for a particular type of risk.

Ceded Premium
The portion of premium transferred by an insurer to a reinsurer.

Commercial Package Policy (CPP)
A policy combining multiple coverages—such as property, liability, and crime—under one contract.

Declarations Page (Dec Page)
The front page of an insurance policy listing essential information such as the insured’s name, policy period, limits, and coverages.

Deductible
The amount the insured must pay out of pocket before the insurer pays a covered loss.

Direct Loss
Damage or loss that results directly from a covered peril.

Directors and Officers (D&O) Liability
Coverage protecting corporate directors and officers from claims alleging wrongful acts in their capacity as company leaders.

Earned Premium
The portion of premium that applies to the expired part of the policy period.

Endorsement
A written modification to an insurance policy that adds, deletes, or changes coverage.

Errors and Omissions (E&O) Insurance
Professional liability coverage for claims arising from negligence, mistakes, or failure to perform professional duties.

Exclusion
A provision in the policy that eliminates coverage for specific risks or causes of loss.

Experience Modification Factor (Mod)
A number used to adjust workers compensation premiums based on an employer’s loss history relative to industry averages.

First-Party Coverage
Insurance that pays benefits directly to the insured for covered losses (e.g., property damage).

Flood Insurance
Coverage for damage caused by flooding, typically written under the National Flood Insurance Program or private markets.

General Liability Insurance
Coverage for bodily injury, property damage, and personal or advertising injury arising out of business operations.

Group Captive
A captive insurer owned by multiple unrelated companies pooling their risks for greater control and potential profit sharing.

Grace Period
The additional time after a premium due date during which a policy remains in force before cancellation.

Hazard
A condition that increases the likelihood or severity of a loss.

Hold Harmless Agreement
A contractual clause in which one party agrees to assume the liability of another.

Homeowners Insurance
A personal insurance policy covering dwelling, personal property, and liability for homeowners.

Indemnification
Restoration to the financial position before a loss occurred, without gain or profit.

Inland Marine Insurance
Coverage for property in transit or of a movable nature, such as tools, equipment, or fine arts.

Insurable Interest
A financial stake in the insured property or person that would result in financial loss if the event occurred.

Insuring Agreement
The portion of the policy describing what is covered and under what circumstances.

Key-Persons Insurance - a policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.

Kidnap/Ransom Insurance - coverage for ransom or extortion costs and related expenses.

Lapse - termination of a policy due to failure to pay the required renewal premium.

Liability
Legal responsibility for injury or damage to another person or property.

Liquor Liability - coverage for the liability of an entity involved in the retail or wholesale sales of alcoholic beverages, or the serving of alcoholic beverages, to persons who have incurred bodily injury or property damage arising from an intoxicated person.

Long-Term Care - policies that provide coverage for not less than one year for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital, including policies that provide benefits for cognitive impairment or loss of functional capacity. This includes policies providing only nursing home care, home health care, community based care, or any combination. The policy does not include coverage provided under comprehensive/major medical policies, Medicare Advantage, or for accelerated death benefit-type products.

Loss Ratio
The ratio of claims paid to premiums earned, used as a measure of underwriting performance.

Loss Reserves - an estimate of liability or provision in an insurer's financial statement, indicating the amount the insurer expects to pay for losses incurred but not yet reported or reported claims that haven't been paid.

Loss Run Report
A summary of an insured’s claim history used for underwriting and renewals.

Medical Payments Coverage
Pays for medical expenses resulting from bodily injury, regardless of fault.

Mutual Insurance Company
An insurer owned by its policyholders, who share in profits through dividends or reduced premiums

Named Insured - the individual defined as the insured in the policy contract. .

Named Peril Coverage - insurance for losses explicitly defined in the policy contract.

Negligence - failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

Net Income - total revenues from an insurer's operations less total expenses and income taxes

Net Premiums Earned - premiums on property/casualty or health policies that will not have to be returned to the policyholder if the policy is cancelled.

NFIP - National Flood Insurance Program - flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool .

Nonadmitted Insurer - insurance company not licensed to do business within a given state.

Occurrence Policy
Covers losses from incidents that occur during the policy period, regardless of when the claim is reported.

Other Insurance Clause
Defines how coverage applies when multiple policies cover the same loss.

Personal Auto Policy (PAP)
Provides liability, collision, comprehensive, and other coverages for private passenger vehicles.

Personal Injury Protection (PIP)
Covers medical expenses, lost wages, and related costs regardless of fault in an auto accident.

Personal Property
Movable property owned by an individual, such as furniture, clothing, and electronics.

Premises Liability
Coverage for bodily injury or property damage occurring on premises owned or operated by the insured.

Premium
The price paid by the insured to the insurer for coverage.

Reinsurance
Insurance purchased by an insurer to transfer part of its risk to another company.

Replacement Cost
The amount needed to replace damaged property without deduction for depreciation.

Retention
The amount of risk the insured or captive retains before insurance applies.

Risk Management
The process of identifying, analyzing, and mitigating risks to minimize financial loss.

Salvage
The remaining value of damaged property that can be recovered after a loss.

Schedule Rating
A method of adjusting premiums based on specific risk characteristics of the insured.

Self-Insurance - type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.

Self-Insured Retention (SIR)
The amount of loss the insured must pay before the insurance policy responds, similar to a deductible but handled differently in claims.

Short-term Disability - a company standard defining a period of time employees are eligible for short-term disability coverage, typically for 2 years or less.

Soft Market - a buyer's market characterized by abundant supply of insurance driving premiums down.

Subrogation
The insurer’s right to recover from a third party responsible for a loss after paying the insured’s claim.

Subrogation Clause - section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.

Surety Bond - a three-party agreement whereby a guarantor (insurer) assumes an obligation or responsibility to pay a second party (obligee) should the principal debtor (obligor) become in default.

Surplus Line - specialized property or liability coverage available via nonadmitted insurers where coverage is not available through an admitted insurer, licensed to sell that particular coverage in the state.

Term Insurance - life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.

Third-Party Coverage
Insurance that pays for damages or injury caused by the insured to another person or entity.

Total Loss
A loss in which the cost to repair equals or exceeds the property’s value.

Umbrella and Excess (Commercial) - coverage for the liability of a commercial venture above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.

Umbrella and Excess (Personal) - non-business liability protection for individuals above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.

Underwriting
The process insurers use to evaluate risk and determine premium and coverage terms.

Unearned Premium - amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.

Universal Life Insurance - adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder's annually.

Variable Annuity - an annuity contract under which the premium payments are used to purchase stock and the value of each unit is relative to the value of the investment portfolio.

Variable Life Insurance - life insurance whose face value and/or duration varies depending upon the value of underlying securities.

Variable Universal Life - combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts. The policyholder selects the accounts into which the premium payments are to be made.

Waiver of Subrogation
An endorsement preventing the insurer from pursuing recovery from a third party responsible for a loss.

Whole Life - life insurance that may be kept in force for a person's entire life and that pays a benefit upon the person's death, whenever that may be.

Whole Life Insurance - life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period.

Workers' Compensation - insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.

Written Premium - the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.